HEALTH SAVINGS ACCOUNTS: ANSWERING THE CRITICS

March 21, 2006

Critics of Health Savings Accounts (HSAs) have a litany of complaints. They are essentially the same complaints critics made a decade ago, at the dawn of the consumer-driven health care revolution. We now have evidence that consumer-driven health care works. In addition to the decade of experience with Medical Savings Accounts (MSAs) in South Africa, Americans have had six years' experience with an MSA pilot program, four years with similar accounts called Health Reimbursement Arrangements (HRAs) and two years with HSAs themselves, say John C. Goodman, president of, and Devon Herrick, a senior fellow with, the National Center for Policy Analysis.

What follows are answers to some of the most important criticisms.

Criticism: HSAs primarily benefit the healthy.

Reply: People with significant health problems benefit from HSA plans because they have a maximum out-of-pocket expenditure, whereas traditional health plans have no such limit. That is why out-of-pocket spending for such patients often goes down when they switch to HSA plans.

Criticism: HSAs won't help reduce the number of uninsured.

Reply: HSAs have already reduced the number of uninsured Americans. America's Health Insurance Plans, a trade group for health insurers, reports that about one-third of people who individually purchased HSA plans were previously uninsured. This is consistent with reports from Assurant and eHealthInsurance, which found that about half of those with incomes under $35,000 had not had coverage for at least six months prior to enrollment.

Criticism: Consumers don't like HSAs.

Reply: HSAs are spreading rapidly. A survey by America's Health Insurance Plans finds that about 3.2 million people are enrolled in HSA plans and another 3 million have HRAs. A U.S. Treasury estimate projects 14 million HSA accounts by 2010 and 21 million if President Bush's recent proposals are adopted.